We have demonstrated that the enzyme sphingomyelinase is able to induce differentiation of the promyelocytic cell line HL-60. This new pathway for monocytic differentiation may explain the ability of TPA to differentiate HL-60 cells. Differentiation is mediated by the breakdown product of sphingomyelin:phosphorylcholine. Preliminary evidence suggests that the phorbol ester, TPA, differentiates HL-60 cells via stimulation of sphingomyelinase and not via C-kinase.